Pay Without Performance: The Unfulfilled Promise of Executive Compensation

Lucian Bebchuk, Jesse M. Fried

Harvard University Press, 2009 - 278 Seiten

The company is under-performing, its share price is trailing, and the CEO gets...a multi-million-dollar raise. This story is familiar, for good reason: as this book clearly demonstrates, structural flaws in corporate governance have produced widespread distortions in executive pay. Pay without Performance presents a disconcerting portrait of managers' influence over their own pay--and of a governance system that must fundamentally change if firms are to be managed in the interest of shareholders.

Lucian Bebchuk and Jesse Fried demonstrate that corporate boards have persistently failed to negotiate at arm's length with the executives they are meant to oversee. They give a richly detailed account of how pay practices--from option plans to retirement benefits--have decoupled compensation from performance and have camouflaged both the amount and performance-insensitivity of pay. Executives' unwonted influence over their compensation has hurt shareholders by increasing pay levels and, even more importantly, by leading to practices that dilute and distort managers' incentives.

This book identifies basic problems with our current reliance on boards as guardians of shareholder interests. And the solution, the authors argue, is not merely to make these boards more independent of executives as recent reforms attempt to do. Rather, boards should also be made more dependent on shareholders by eliminating the arrangements that entrench directors and insulate them from their shareholders. A powerful critique of executive compensation and corporate governance, Pay without Performance points the way to restoring corporate integrity and improving corporate performance.

Inhalt

• Introduction: 1
• The Official View and Its Shortcomings: 13
• The Official Story: 15
• Have Boards Been Bargaining at Arms Length?: 23
• Shareholders Limited Power to Intervene: 45
• The Limits of Market Forces: 53
• Power and Pay: 59
• The Managerial Power Perspective: 61
• The Relationship between Power and Pay: 80
• Managerial Influence on the Way Out: 87
• Retirement Benefits: 95
• Executive Loans: 112
• Decoupling Pay from Performance: 119
• NonEquityBased Compensation: 121
• Windfalls in Conventional Options: 137
• Excuses for Conventional Options: 147
• More on Windfalls in EquityBased Compensation: 159
• Freedom to Unwind Equity Incentives: 174
• Going Forward: 187
• Improving Executive Compensation: 189
• Improving Corporate Governance: 201
• Notes: 217
• References: 257
• Index: 271

Bibliografische Informationen

• Titel: Pay Without Performance: The Unfulfilled Promise of Executive Compensation
• Autoren: Lucian Bebchuk, Jesse M. Fried
• Verlag: Harvard University Press, 2009
• ISBN: 0674020634, 9780674020634
• Länge: 278 Seiten